Mastering Forex sessions for effective trading
When thinking about the Forex trading strategy, it is necessary to take into account the time of buying/selling assets. From Monday 00:00 to Friday 00:00. However, on these working days there are 4 Forex trading sessions, which alternate in a circle. At certain times trading is peaceful and calm, there are times when trades open and close at the speed of light. Therefore, if you don’t pay attention to when you trade, you may miss important market movements or even take unnecessary risks. Choosing the wrong time to enter the market often results in losing money instead of making a profit.
Today we will take a look at Forex trading sessions and their peculiarities. This will give you the information you need to choose the right time to enter the market and avoid losses.
Definition of a trading session
A forex trading session is a period of time during which exchanges are open in a particular geographic area. During this time, financial instruments such as currencies, stocks or futures can be actively traded. Depending on the location of an exchange, its opening hours will vary. This leads to changes in liquidity and activity in the market.
The trading session consists of three stages, which allow even beginners to trade according to clear rules and opportunities.
- The first stage is pre-market. It is a preparatory phase before the start of active trading. It is the time before the official opening of the stock market when traders can place orders. In addition, this period allows to analyze market news that may affect the price of the asset.
- The second stage is the main session. It is the most active period, during which the largest volume of opening/closing transactions takes place. This is due to maximum liquidity and minimum unfavorable spreads.
- The last stage is the post-market. This is the time after the main session is closed. Liquidity decreases significantly and the market becomes more volatile during this period. Post-market is suitable for placing limit orders and closing open positions. However, active trading during this period is associated with high risks due to wider spreads and smaller number of participants.
Main trading sessions in the Forex market
Forex is a global market of financial assets. It operates 5 days a week, excluding weekends. This is possible because live Forex trading sessions alternate in different parts of the world. Each trading session corresponds to the opening and closing of the stock exchanges in a particular region of the world. This factor has a direct impact on market activity and volatility. There are four main trading sessions, each of which has its own peculiarities and affects the prices of currency pairs.
Sydney Session or Pacific Session
The Sydney Session or Pacific Session is considered the start of the trading week around the world. It is a relatively quiet time with low market liquidity. This means that this session is more suitable for beginners and those trading pairs involving the Australian and New Zealand Dollars.
This session begins at 21:00 GMT and ends at 06:00 GMT (Greenwich Mean Time).
Tokyo Session or Asian Session
After Sydney, the Tokyo session begins in Tokyo, the largest financial center in Asia. The Tokyo session is also known as the Asian session and starts working from 00:00 to 09:00 GMT.
During this time, currency pairs such as USD/JPY, EUR/JPY and AUD/JPY see increased activity. The Asian markets set important trends for the day, as volatility is higher than in the previous session.
London Session or European Session
The European session is one of the most active of the 4 forex trading sessions because London is the largest financial center in the world. It also overlaps with the Tokyo and New York sessions. As a result, many traders coordinate their trading strategies.
The opening time for orders is 7:00 am and the closing time for trades is 3:00 pm. At this time, there is significant activity in most of the major currency pairs, such as EUR/USD and GBP/USD, making the London session attractive for short-term traders.
New York Session or American Session
The New York session concludes the trading day and is the best forex session for active traders. It is characterized by high volatility and active movement in pairs such as USD/CAD, EUR/USD and GBP/USD. Many news and economic reports from the U.S. released during this period can dramatically affect the market, creating both profit opportunities and risks.
Session Name | Working hours (UTC) | Key Markets |
Pacific Session | 22:00 – 07:00 | Australia, New Zealand |
Asian Session | 00:00 – 09:00 | Japan, China |
Overlap Tokyo-London | 08:00 – 09:00 | Tokyo, London |
London | 08:00 – 17:00 | United Kingdom, Europe |
Overlap London – New York | 13:00 – 17:00 | London, New York |
New York | 13:00 – 22:00 | USA, Canada |
The impact of trading sessions on the movement of currency pairs
Forex trading sessions directly affect currency pair movement and the overall market. Each session has its own trader activity and liquidity. This is reflected in the volatility of different currency pairs, including popular (EUR/USD), minor (EUR/JPY) and exotic (USD/ZAR). The 4 major forex trading centers are Sydney, Tokyo, London and New York. They overlap and create periods of increased activity when significant price changes can be observed in the market.
For example, during the Sydney session, market activity is relatively low. However, during the Tokyo session, the market seems to come alive. Traders begin to actively place orders, which creates more volatility, especially for pairs related to the Japanese yen (USD/JPY, EUR/JPY). You can use this time to study trends that may continue throughout the day.
The most significant currency movements are seen during the London session, which overlaps with the Asian session ending and the American session beginning. During this period, liquidity rises rapidly and pairs such as EUR/USD, GBP/USD and EUR/GBP experience the greatest fluctuations. The New York session concludes the trading day, and its characteristics depend on news and economic data from the US. During this time, volatility increases again, especially for US dollar pairs such as USD/CAD, EUR/USD and GBP/USD. Experienced traders prefer to open trades during the release of economic reports, as they can cause sharp price fluctuations.
Therefore, you should focus on your trading strategy, currency and geographical location. Forex trading sessions indicator can help in this, which will provide comparative data of the required assets for a certain period of time. It is necessary to set it up yourself. However, it is important to take into account that the working hours of the exchange depend on the time of the transition to the winter and summer time.
Effective Trading Strategies for Every Session
Each Forex session has its own characteristics which directly affect the strategies you choose to trade. To be successful, it is important to consider the volatility, currency pair activity and key events in each session. Here are some strategies that can be effective for different periods of the trading day.
Strategy | Relevant session | Reasons | Characteristics |
Trading on breakdowns | Sydney | – Low volatility – Formation of tight ranges | – Works with AUD/USD, NZD/USD – Suitable for conservative traders |
Trading on reversals | Tokyo | – Formation of initial trends – Large fluctuations in pairs with JPY | – Effective for USD/JPY, EUR/JPY – Short-term trading opportunities |
Trend Trading | London Market | – High activity and volume – Crosses with other sessions | – Suitable for EUR/USD, GBP/USD, EUR/GBP – Long term trend opportunities |
Trading on the News | New York | – Major Economic News – High volatility | – Effective for USD pairs (USD/CAD, EUR/USD) – Requires quick reaction and risk management |
Scalping | London/New York | – High liquidity – Frequent small price movements | – Requires fast response and low spreads – Suitable for EUR/USD, GBP/USD |
Swing Trading | All sessions | – Ability to take advantage of price movements over several days | – Less stress than intra-day trading – Suitable for all major pairs |
Trading by levels | Tokyo/London | – Formation of important support and resistance levels | – Effective for USD/JPY, EUR/USD – Requires technical analysis skills |
General Risk Management Techniques
Regardless of the session and trading strategy, it is important to remember and follow the basic principles of risk management. Many traders use a multi-currency portfolio to diversify risks and not be dependent on the movement of one currency pair. You can also follow the principles of money management, for example, not risking more than 1-2% of your deposit in one transaction. And of course, the use of Stop Losses and Take Profits is absolutely necessary to minimize losses and lock in profits in a rapidly changing market environment.
FAQ
A trading session indicator allows traders to choose the optimal time to enter a trade by visually identifying active market periods. This is especially useful for volatility or liquidity based strategies as it helps to avoid periods of low activity and focus on the most profitable time frames.
The London session is generally considered to be the most volatile forex trading session due to the high volume of trading and the participation of large financial institutions. Particularly high volatility is observed during the overlap of the London and New York sessions, when traders from two major financial centers are active in the market.
The peak hours for Forex trading sessions based on Singapore time (SGT) are from 15:00 to 23:00 SGT. This time corresponds to the active phase of the London session and the beginning of the New York session, ensuring high liquidity and volatility in the market.